FT : A California setback for gig economy workers

A California setback for gig economy workers
Referendum on labour rules for platform companies is bad policymaking

The fight for proper protections for gig economy workers has suffered a setback. A California ballot initiative, Proposition 22, this week overturned a state assembly law seeking to give the likes of Uber drivers the legal status of employees rather than independent contractors. While the victory may have led to soaring share prices for Uber and Lyft, it is a loss not only for workers but also for good policymaking. The risk is that it starts to shape laws elsewhere in the US.

Tuesday’s referendum was the latest move by gig economy businesses in a rearguard action against regulations that grant their workers rights including sick and holiday pay. In August, they already lost an appeal over the assembly law in the Supreme Court. They argued that those who use their platforms are not employees but work directly for customers; their apps act solely as matchmakers.

California has a history of bad ballot initiatives: from the 1978 “tax revolt” that helped to cripple the state’s finances to 2008’s Proposition 8, which overturned a Supreme Court ruling against a ban on same-sex marriages. Proposition 22 was the most expensive referendum in the state’s history: $224m was spent on the campaign, almost 90 per cent by the platform companies. DoorDash, a food delivery service, had drivers deliver takeaways in bags emblazoned with “Yes 22”; Instacart, an app which has workers pick and deliver groceries, had them attach “Yes to 22” stickers to orders. 

Voters, unlike the judges, may have been persuaded by the argument that additional worker protections would imperil the convenience and low costs of these services, which millions have come to rely on during the coronavirus pandemic. For those anxious about the future they may represent rare chances for employment in a time of mass business closures — unemployment in California was 11 per cent in September, against 3.9 per cent a year ago. Some workers, too, are willing to trade protection for the flexibility offered by the apps.

The gig economy companies have also made several concessions. Proposition 22 said that instead of a minimum wage, workers’ compensation and unemployment insurance, employees would be “entitled to other compensation — including minimum earnings, healthcare subsidies, and vehicle insurance”. These, however, fall far short of what workers would have been entitled to if the measure had been rejected. The minimum earnings only cover time travelling to and with passengers, for example, rather than all the time the app is being used.

Arguments that enforcing the law would take away flexibility were specious. Other jurisdictions manage to maintain higher levels of worker protections alongside a variety of different working arrangements. California’s law, which set three tests for classifying workers as an independent contractor, was a well-judged method to clarify the legal grey area in which platform companies have operated. It defined clearly who ought to count as an employee and should therefore enjoy the rights to which they were entitled.

Unfortunately, other attempts to explore new ways of regulating the gig economy in California are likely to come to nought as the state must submit any alterations to a ballot initiative to a public vote.

Winning in the spiritual home of the tech industry and one of the most important markets for the platform companies is a highly symbolic victory, and is likely to lead to attempts to introduce Proposition 22-style measures across the US, including at federal level. Lawmakers elsewhere should not take the Californian example as their model.

FT : Saudi Arabia media group to make play for elite global sports events

Saudi Arabia media group to make play for elite global sports events
Kingdom launches company to shake up multibillion-dollar bidding wars for TV rights in Middle East

Saudi Arabia has launched a state-controlled sports media company to manage and secure broadcasting rights in a move that will shake up the multibillion-dollar bidding wars for the right to televise elite sporting events in the Middle East.

Prince Abdulaziz bin Turki al-Faisal, the sports minister, told the Financial Times that the Saudi Sports Company would create a “platform” for content development and managing TV rights. The move comes as Saudi Arabia uses its financial muscle to lure an increasingly diverse array of global sports events to the kingdom.

On Thursday, it was confirmed that Saudi Arabia had secured the rights to host a Formula One motor race for the next 15 years, beginning in 2021. The kingdom is also in discussions to hold a boxing bout next year between Anthony Joshua and Tyson Fury, an all-British contest for the undisputed heavyweight title, Prince Abdulaziz said.

The Formula One grand prix and the launch of the media company underscore Crown Prince Mohammed bin Salman’s ambitions to develop the kingdom as a regional sporting hub.

Riyadh’s decision to establish the Saudi Sports Company, which will be managed by the sports ministry, comes after a bitter two-year dispute between the kingdom and beIN, a Qatar-owned channel that is estimated to have spent more than $15bn securing the rights to broadcast top European football and other sports for the Middle East.

BeIN accused Riyadh of setting up a pirate television network, beoutQ, which screened events that the Qatari channel held the exclusive rights to. Saudi Arabia, which has been at the forefront of a regional embargo against Qatar, is the Gulf’s most populous country and believed to be the region’s biggest market for sports broadcasters.

Riyadh denied beIN’s allegations. But the World Trade Organization ruled in June that the Saudi government had “infringed” international trade agreements due to the country’s involvement with beoutQ.

The controversy was one of the reasons behind the failure of a Saudi-led £300m bid for Newcastle United, the English football club. It could also undermine Saudi attempts to buy broadcasting rights.

Prince Abdulaziz said the Saudi Sports Company would not bid for TV rights for the Middle East, as beIN has done, but instead focus solely on serving the kingdom. He said initially the entity would concentrate on managing the kingdom’s existing broadcasting rights, which include Formula One, the Paris-Dakar rally, a motor race that took place in Saudi Arabia for the first time this year, and the Spanish and Italian football Super Cups, which it also hosts.

The current rights to broadcast the English, German, Spanish and Italian football leagues expire in the coming years.

BeIN last month said it would not renew its rights to broadcast Germany’s Bundesliga, saying “piracy has crippled the market”. BeIN is banned in the kingdom and the only way for Saudis to watch elite European football is through pirated streaming services.

The sports minister said Riyadh had been contacted by a “number of [football] leagues” but had not reached a “concrete agreement”. He said that the German league had approached the kingdom. People close to the Bundesliga have previously disputed this assertion, saying the league was contacted by a representative of the Saudi state.

“We said we are not interested . . . until we have set up the right platform and then we will discuss it,” Prince Abdulaziz said. “The main target is to manage the broadcasting rights we already have. If we come into an agreement with any of the leagues, or find an appetite for that, we will definitely look into it.”

He dismissed concerns that the piracy allegations would hinder Riyadh’s ability to secure broadcasting rights, insisting that the government had tackled piracy. “When we explain this to them [ football leagues], they understand it,” he added.

He acknowledged that unbundling Middle East contracts to enable Saudi Arabia to secure the broadcasting rights just for the kingdom could be an issue. But he said: “We know that Saudi plays a big chunk of the market.”

The development of a sports industry is viewed as an integral part of Prince Mohammed’s plans to provide more entertainment options for the kingdom’s youthful population — the crown prince’s main constituency as he spearheads a “Vision 2030” plan to modernise the conservative nation.

It is also viewed as a tool of soft power and part of efforts to alter perceptions of the kingdom, which has been tarnished by human rights abuses, including the 2018 murder of Jamal Khashoggi by Saudi agents. Activists have accused Riyadh of attempting to “sports-wash” its reputation by hosting global events.

Saudi Arabia is also bidding to host the Asian football championship in 2027 and the Asian Games athletics meeting in 2030. “There’s a lot of criticism with this, but if we can showcase that we can do something on the continent level that is strong, that will give us a stronger case in the future to maybe bid for either the [football] World Cup or the Olympics,” Prince Abdulaziz said. “Everything is open, a lot of things are being discussed.”

>>> US Gapping down

Gapping down
In reaction to earnings/guidance
:

  • BLUE -14.6%, HBI -14.2%, PING -12.5%, FTDR -10.1%, LCI -8.2%, ELF -7.3%, ABUS -7.2%, STAA -6.4%, ZNGA -5.2%, TISI -5.1%, AXNX -4.9%, OSUR -4.6%, VAPO -4.6%, OESX -4.5%, BCRX -4%, OLN -3.7%, ING -3.4%, SVMK -3.3%, CNK -3.2%, IBP -3.1%, CF -2.5%, BABA -2.5%, ZTS -2.5%, LILA -2.4%, DYN -2.2%, XRAY -2.1%, NRG -2.1%, CTVA -2%, PXD -2%, KURA -2%, FOUR -1.9%, TRMB -1.8%, FROG -1.6%, HTHT -1.6%, NOMD -1.6%, BRX -1.3%, HFC -1.3%, NYT -1.1%, GDOT -1%, KRTX -1%, IGMS -1%, VMC -1%

Other news:

  • APVO -10.3% (provided an update on preliminary data in its ongoing APVO436 Phase 1 clinical trial)
  • STAA -6.4% (announces initial commercialization of EVO Viva presbyopia correcting lens)
  • AVTR -4.6% (commences secondary offering)
  • SFT -1.5% (filed a preliminary proxy statement and Schedule to which contemplates its intention to commence an offer to all holders of Shift's outstanding publicly-traded warrants to exchange shares of Shift common stock and cash for each warrant tendered)

Analyst comments:

  • CORR -2.4% (downgraded to Sell from Hold at Stifel; tgt $1)
  • VMC -1% (downgraded to Sector Perform from Outperform at RBC Capital Mkts)

>>> US Gapping up

Gapping up
In reaction to earnings/guidance
:

  • UPWK +26.4%, REZI +18.9%, QCOM +14.5%, CPRI +13.2%, ODP +9.3%, WCC +9%, MTW +8.2%, WK +8%, QLYS +7.7%, CCRN +7.1%, MELI +6.6%, PRGO +6.6%, AG +6.3%, CRON +6.3%, COMM +6.2%, OBSV +5.9%, NXST +5.8%, GM +5.8%, LUMN +5.7%, ET +5.6%, CRY +5.5%, LCUT +5.5%, VG +5.4%, SRCL +4.9%, DCP +4.8%, VSTO +4.8%, EXPE +4.5%, FOE +4.3%, MDP +4.3%, IIVI +4.2%, PH +4.2%, MTCH +4.1%, LSPD +4.1%, GDDY +4%, CMRX +3.9%, KGC +3.8%, ALB +3.7%, CAH +3.7%, AWK +3.6%, NS +3.6%, HOLX +3.4%, PDCE +3.4%, AAON +3.3%, GOLD +3.2%, LNTH +3.2%, YETI +3.1%, PRMW +3.1%, THS +3.1%, BDX +3%, ALL +2.9%, PLUS +2.9%, IRM +2.9%, SJI +2.8%, KL +2.7%, GPX +2.6%, SPNS +2.6%, TYL +2.5%, RPD +2.4%, CEIX +2.4%, TSLX +2.3%, JKHY +2.3%, PSTG +2.2%, LNC +2.2%, LC +2.2%, AMRN +2.2%, QRVO +2.1%, MT +2.1%, UHAL +2%, TWO +2%, APA +2%, IAG +2%, PODD +1.9%, LHCG +1.9%, AZN +1.9%, PAAS +1.8%, SAGE +1.8%, GOOS +1.8%, ANSS +1.7%, PZZA +1.7%, BMY +1.7%, SRE +1.7%, STWD +1.6%, QGEN +1.5%, FNV +1.5%, LBTYA +1.5%, SHYF +1.5%, CXW +1.4%

Other news:

  • APHA +13.7% (to acquire SweetWater Brewing)
  • MGNX +10.5% (files for $100 mln mixed securities shelf offering)
  • JCS +8% (acquired the operating assets of privately held IVDesk)
  • GMAB +5.2% (Genmab confirms that Janssen (JNJ) submitted Type II variation application to the European Medicines Agency for use of subcutaneous DARZALEX (daratumumab) in patients with light-chain amyloidosis; triggers a USD 5 million milestone payment to Genmab)
  • BDSI +4% (new CEO; also authorizes new $25 mln share repurchase program)
  • LMPX +3.2% (announces exclusive new vehicle lease/subscription agreement with LTO Holdings)
  • ENDP +2.5% (announces strategic actions to optimize operations)
  • VRTX +2% (receives EC approval for KALYDECO; Approval provides opportunity to treat the underlying cause of cystic fibrosis earlier than ever before in Europe)
  • COST +1.7% (reports October total comps +14.4%)
  • MRK +1.5% (to acquire VelosBio for $2.75 billion in cash)
  • GILD +1.4% (ProteoNic licenses its 2G UNic technology platform for production of biologics to Gilead)

Analyst comments:

  • LOGI +4.5% (upgraded to Buy from Hold at Kepler)
  • CLH +3.3% (upgraded to Buy from Neutral at UBS)
  • CS +2.7% (upgraded to Buy from Hold at Kepler)
  • MSFT +2.7% (upgraded to Outperform from Perform at Oppenheimer)
  • WU +2.7% (upgraded to Neutral from Sell at Citigroup)
  • PYPL +2.6% (upgraded to Buy from Hold at DZ Bank)
  • VZ +1.3% (upgraded to Overweight from Neutral at JP Morgan)

WSJ : Pandemic Boosts Investor Appetite for Niche Funds

Pandemic Boosts Investor Appetite for Niche Funds
Inflows into ‘thematic’ ETFs and mutual funds hit record as investors chase broad investment themes such as cybersecurity, green energy and health technology

Investors poured money at a record clip into funds that track buzzy themes hoping to profit on ways Covid-19 will upend the economy.

“Thematic” funds, which track trends such as cybersecurity, green energy and health technology, took in a record $42 billion in the U.S. and Europe in the first nine months of the year. That is more than in any previous full calendar year, according to Morningstar data.


There is no single definition of what makes a fund “thematic,” though generally they differ from traditional index ETFs and mutual funds by investing in stocks that cut across geographies and sectors. They go after companies that benefit from broad changes in society such as digitization, adoption of clean energy, or aging populations.

Some of the most popular among them were funds that concentrate on themes that have done well in the pandemic, especially digital businesses.

The actively managed ARK Innovation ETF ARKK 4.67% has taken in more than $5 billion this year so far, and risen around 95%. FactSet data show. The fund invests in companies it believes will benefit from growth in fields including genomics and internet services. It holds stakes in genetic testing company Invitae Corp , workplace communications platform Slack Inc. and 2U Inc., a company that helps universities offer online degree programs.

“Some of these long-term themes that were generally accepted for the future have been sped up due to the pandemic as a large percentage of the global population is working from home and staying at home,” said Todd Rosenbluth, head of ETF and mutual fund research at research firm CFRA.


In Europe, the Allianz Global Artificial Intelligence fund, has climbed around 50%, and had pulled in more than $1.3 billion by the end of September, Morningstar data show. It holds shares of companies that have benefited from stay-at-home orders, such as Roku Inc., which makes streaming-media devices, and cloud-communications company Twilio Inc.,

Most of the money in U.S. thematic products is in passive funds that mimic the returns of custom indexes. In Europe, far more money is in actively managed thematic funds.

The inflows into thematic funds are a speck compared with the trillions invested in low-cost index funds. Assets under management in thematic funds stood at a record $215 billion at the end of September, up from $145 billion at the end of 2019, Morningstar data show. Yet the growing niche represents an opportunity for fund managers to charge higher fees.

“The fee pressure is always gonna be there,” said Rahul Bhushan, investment strategies lead at Rize ETF, a London-based fund issuer. “You can only credibly innovate in an area where people see you as a specialist,” Mr. Bhushan said.


Passive thematic funds in North America charge around 0.59% on average compared with 0.44% for a non-thematic fund. Vanguard’s S&P 500 ETF, which trades under the ticker VOO, charges 0.03%.

Asset managers and industry analysts chalk up the success of thematic funds, at least in part, to the fact they offer a clear way to invest in an overarching narrative.

“We’ve seen a greater uptake of products that make intuitive sense, that are doing what they say on the tin,” said Mr. Bhushan. His firm offers funds dedicated to sustainable food production and data privacy, among others.

Among the big winners this year are funds that bet on renewable energy. The pandemic accelerated a shift away from fossil fuels thanks to government support, low interest rates and falling costs for things such as solar and wind.

BlackRock’s iShares Global Clean Energy ETF, which invests in companies such as solar panel manufacturers and wind turbine makers, in the U.S., Europe and Asia, has risen around 70% this year, pulling in more than $1 billion in the process. Invesco’s Solar ETF has risen 120%, and pulled in more than $630 million.

The question for investors is whether paying higher fees is worth it. Morningstar research published in February showed that about 32% of thematic funds launched before 2015 had closed. Of those that had survived, only 41% outperformed the MSCI World Index, a broad stock benchmark.

The percentage of theme-based funds that both survive and outperform their benchmarks is “very, very low,” said Kenneth Lamont, a senior research analyst at Morningstar. To profit from thematic investing, investors not only have to identify a growth area, but pick a fund that provides the right exposure to companies in that sector. On top of that, they have to pick the right time to enter the market, he said.

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • UPWK +27.7%, APHA +15.1%, QCOM +14.2%, MGNX +10.5%, CPRI +10.4%, MTW +8.2%, JCS +8%, WK +8%, QLYS +7.7%, PRGO +7.5%, LUMN +7.2%, ET +6.8%, CCRN +6.5%, MELI +6.4%, COMM +6.2%, CRY +5.5%, GMAB +5.3%, CXW +5.3%, YETI +5%, CHNG +4.9%, EXPE +4.9%, DCP +4.8%, PZZA +4.4%, FOE +4.3%, LBTYA +4.1%, IRM +4.1%, BDSI +4%, KGC +3.9%, AWK +3.6%, PDCE +3.4%, MTCH +3.3%, MT +3%, PLUS +2.9%, GDDY +2.8%, SJI +2.8%, SUN +2.7%, GOLD +2.5%, PSTG +2.4%, HOLX +2.4%, RPD +2.4%, MDP +2.4%, QRVO +2.3%, TSLX +2.3%, JKHY +2.3%, VRTX +2.2%, LNC +2.2%, SFT +2.1%, GILD +2.1%, UHAL +2%, TWO +2%, LHCG +1.9%, HTHT +1.9%, APA +1.8%, ALL +1.8%, SAGE +1.8%, FOUR +1.8%, REGN +1.7%, LMPX +1.4%, AZN +1.4%, CI +1.4%, LSPD +1.4%, TTGT +1.3%, WRK +1.3%, ORCC +1.2%, MRK +1%, SATS +1%, LAMR +0.9%, KL +0.9%, SEAS +0.9%
  • Gapping down:
    • LCI -13.8%, BLUE -13.2%, PING -12.7%, FTDR -10.1%, INGN -8.1%, ELF -7.5%, TISI -5.1%, AVTR -4.6%, CMP -4.1%, SGMS -3.9%, ING -3.9%, ZNGA -3.7%, CF -2.7%, CTVA -2%, PXD -2%, TRMB -1.8%, STAA -1.6%, OLN -1.6%, STAA -1.6%, HBI -1.5%, FNV -1.4%, BRX -1.3%, PSA -1.3%, HFC -1.3%, OSUR -1.2%, CNK -1.2%, NEWT -1.1%, GDOT -1%, PODD -1%, KRTX -1%

FT : Ant Group IPO faces at least 6-month delay after Beijing intervention

Ant Group IPO faces at least 6-month delay after Beijing intervention
Chinese fintech’s valuation could fall after being hit by new regulations

Ant Group’s initial public offering could be delayed by at least six months and its valuation sharply reduced after Beijing abruptly halted its trading debut this week, people directly involved in the deal and investors said.

Shares of China’s biggest financial technology group, which was set to raise $37bn in the world’s largest IPO, were due to begin trading in Shanghai and Hong Kong on Thursday.

But the Shanghai Stock Exchange suspended the listing on Tuesday night, a day after Beijing announced draft regulations that investors said would force the payments company to rethink its business model.

Lawyers involved in Ant’s listing said the company would have to respond to Chinese regulators’ demands and submit a new IPO prospectus in Hong Kong, which could take at least six months.

“The key thing is these new regulation changes,” said one person with direct knowledge of the deal.

The draft regulations could weigh heavily on Ant’s lending business, which drove about 40 per cent of its sales in the first half, and have an impact on the company’s valuation.

The rules require internet platforms to provide at least 30 per cent of the funding of their loans and to cap loans at Rmb300,000 ($44,843) or a third of a borrower’s annual salary, whichever is lower. Currently, Ant funds only 2 per cent of its total loans with the rest coming from other sources such as banks.

The changes could dramatically alter the risk profile of Ant, which currently acts as a high-tech matchmaker between banks and borrowers.

Based on estimates that Ant has Rmb1.8tn ($271bn) in consumer loans outstanding, research company Morningstar calculates it will have to hold Rmb540bn in loans on its balance sheet.

Piyush Gupta, chief executive of Singapore-based DBS, one of the banks involved in underwriting Ant’s IPO, said the fintech company may “need to reconstruct their business models, and so the business model projections might change”.

Ant Group declined to comment on the current timeline of its IPO.

The new regulations could make its business model more akin to a bank, a sector that is highly regulated, investors said. It could also leave Ant’s balance sheet more exposed in the event of loans turning sour.

“The value of Ant depends on the extent to which [the] new rules are implemented,” said a Shanghai-based fund manager who subscribed to Ant’s IPO. “If they get strictly carried out, Ant would be worth less than half of what it is now.”

Jerry Wu, a fund manager at investment company Polar Capital, said that Ant’s valuation was likely to be lower for any revived IPO as investors cut their expectations for its growth.

“That is going to have an impact on how the market values it and sees the risk,” said Mr Wu, whose fund owns a stake in Alibaba, the Chinese ecommerce group from which Ant was spun off.

The IPO is “not going to happen any time soon”, he added. “It could be six months, nine months, a year or two.”

There are some hopes within Ant that there could be changes to the draft regulations, including the requirements on funding. “It is only a draft for public opinion, not legally binding . . . nobody knows what and how much it will change,” said a person familiar with the group’s thinking.

Some are optimistic about how quickly the IPO could be restructured. “My own sense is that Ant will be back in the markets over the next few months,” DBS’s Mr Gupta added.

>>> Europe : Brokers Upgrades & Downgrades - 5th of November 2020 V2 (+)

>>> Up
* Airbus Raised to Hold at Nord/LB; PT 63 euros
* Amadeus PT Raised to 67 euros from 57 euros at Morgan Stanley
* BPER Banca Raised to Buy at Banca Akros (ESN) (+)
* Bpost PT Raised to 12 euros from 10 euros at Jefferies
* Cellnex Raised to Neutral at JB Capital Markets; PT 56 euros (+)
* Cyfrowy Raised to Buy at Wood & Company; PT 30.60 zloty
* Fresenius SE Raised to Buy at Nord/LB; PT 40 euros
* Galenica Raised to Buy at Mirabaud Securities (+)
* Glaxo Raised to Hold at Shore Capital
* Hannover Re Raised to Buy at LBBW; PT 155 euros (+)
* INWIT Raised to Buy at Intesa Sanpaolo; PT 12 euros (+)
* ISS Raised to Buy at SEB Equities; PT 125 kroner
* LPP Raised to Buy at HSBC; PT 7,560 zloty
* Salzgitter Raised to Buy at Bankhaus Metzler; PT 22 euros (+)
* Segro Raised to Hold at Peel Hunt
* Trainline Raised to Overweight at JPMorgan; PT 430 pence (+)
* Tritax Big Box Raised to Add at Peel Hunt
* Zalando Raised to Buy at Invest Securities SA; PT 102 euros (+)

>>> Down
* Coats Cut to Hold at HSBC; PT 62 pence
* Endesa Cut to Neutral at Alantra Equities; PT 28 euros (+)
* Tele Columbus Double-Downgraded at H&A on TV Challenges, Debt (+)

>>> Initiation
* Hensoldt Rated New Buy at Citi; PT 15 euros
* Homeserve Reinstated Outperform at Credit Suisse (+)
* Kin & Carta PLC Rated New Buy at Liberum; PT 175 pence (+)
* Siemens Energy Rated New Buy at SocGen; PT 26 euros
* Watches of Switzerland Rated New Buy at Jefferies; PT 470 pence

>>> Call
* Hensoldt to Benefit From Growth in German Defense Spending: Citi
* Lancashire Shares Set to Outperform After Update: Morgan Stanley (+)
* Lufthansa Capacity ‘Ambitious,’ Cash Burn Needs Focus: Bernstein (+)
* SocGen Results Strong as Net Profit Dwarfs Consensus: Jefferies (+)
* Tele Columbus Double-Downgraded at H&A on TV Challenges, Debt (+)
* UniCredit 3Q Results Solid, Strong Beat on Capital: Jefferies (+)
* Watches of Switzerland Has Further Upside Scope: Jefferies